A Step-by-step Guide To Clearing Credit Card Debt As Told By A Seasoned Financial Planner

There are plenty of things in this world that are easy to get into but hard to get out of. Debt is one of them. Credit card debt, to be precise, ranks among the top of the pile for most working professionals. So, how do you get rid of your debt? Many verses have been written and digested but none have provided the right insight or have had the impact that a person in debt is satisfied with. So, here’s our take on how to become debt-free as told by a financial planner.

• Know how much you owe

In order to clear your credit card deb you need to how how much you owe in the first place. We don’t mean a ballpark figure here, we expect you to know exactly how much money you owe your card company, to the cent. While at it, also create a list of all the expenses you incur every month: bills, outstanding balances and its interest and just about everything you spend your money on.

• Work on your spending habit

If you have racked up sizeable debt that requires an external counsel to clear it, there’s a definite chance that your spending habit has been bad. To make sure you are never in any debt whatsoever, you need to take a deeper look at what you spend on and bring them under control or halt them altogether. Every one of us have a habit of spending on something we don’t necessarily require: a gym membership here, a random subscription there, and the list goes on.
The problem here isn’t that you have these subscriptions, the problem is that you barely spend any time making use of them. So, make sure to rid yourself of any such commitments and work consciously towards changing your spending behaviour.

• Consolidate your debt

Once your know how much debt you are in and have figured out what expenditure you can live without, you will need to work on finding a way to make the payment. For starters, you can opt for a balance transfer and switch to a different card company that offers a much better Annual Percentage Rate (APR) than your current card. If you think a balance transfer isn’t the right option for you, go for a personal loan instead as they come with much lower interest rates and offer longer repayment periods.

• Make use of your assets

Use any assets you have to clear off your debt, even if it is at the slightest. In case you have an RD or an FD that is close to maturing, use it up to clear off a major chunk of the debt. This way you won’t have to go looking for a loan. Also, if you do have one of these and decide to go for a loan, you will end up paying more interest than an RD or a FD is likely to earn in the same time period.

• Go one card after the other

When the debt keeps on piling, the pressure on you to clear it will keep mounting too. Rather than worrying about clearing the debt altogether. Go on a card-to-card basis, look at the card with the highest outstanding first and pay that off first. Prioritising the payment from most to least in terms of balance payable will help reduce the interest burden on you.

• Follow a strict no balance carrying policy

Credit card debts happen when you starting carrying outstanding balances and add to it before clearing the remaining ones. So, avoid the ordeal completely and follow a strict no balance policy for yourself.
A credit card debt is a really bad thing to have, but it is by no means the worst. WIth proper planning and strategy it can be overcome but it requires the right kind of discipline from you.